Innocent Smoothies - Case Study Example

Running head: BUSINESS ENVIRONMENT ANALYSIS Business Environment Analysis: A Case Study of Innocent Smoothies s Innocent Smoothies is one of the leading fruit juices manufacturing company in UK. “Taste remains the company’s number one priority. Innocent has won more taste test awards than its competitors, scooping Best UK Soft Drink in the Q Awards, the UK’s principal food industry competition, every year since 2002.” (Farr, 2006) “The Company sells 70,000 fresh, healthy drinks each day everywhere from Boots to Sainsburys to a local deli. The company has the only range of 100% pure fruit smoothies that uses fresh, rather than concentrated juice.” (Innocent drinks, 2004) SWOT Analysis of the Innocent Smoothies STRENGTHS Strong Brand name. Extended customer in more than 200 countries. Use of SAP R/3 Enterprise Resource planning software Low threat of new entrants. Continuous training programs for employees. High budgets of advertising and promotion. Good relations with media. Web based presence. WEAKNESSES Low ROE Subsidiaries create legal and territorial problems. Lack of funds for regional bottlers to continue expansion Old image still exists. Inconsistent marketing message. OPPORTUNITIES Expansion in shape of introduction of new and innovative products. Expanding market due to globalisation. THREATS Current economic climate. Over reliance on the bottlers. Results to be achieved in future can be less than projected “The Threats-Opportunities-Weaknesses-Strengths (TOWS) Matrix is an important matching tool that helps managers develops four types of strategies: So Strategies, WO strategies, ST Strategies, and WT Strategies. SO strategies use a firm’s internal strengths to take advantage of external opportunities. WO Strategies aim at improving internal weaknesses by taking advantage of external opportunities. ST Strategies use a firm’s strengths to avoid or reduce the impact of external threats. WT Strategies are defensive tactics directed at reducing internal weaknesses and avoiding environmental threats.” (David, 180-181) In order to understand the external environment of the Company it is important to undertake the PESTLE analysis, which is as follows: Political: Decrease in demand due to unstable political situation. Economic: Imposition of Tax or quota from the Government on the major players of market in order to avoid monopoly in the market. Socio-cultural: The population of U.K is getting more conscious about the problems related to obesity and health. Any product having the health effecting ingredients can lead to the loss of market share. Technological: Achievement of advanced technology by the competitors resulting in shape of economies to scale. Legal: Legal actions against the company as a result of disease due to fruits bred in unconventional manner. Environmental: The Company can face environmental threat because of the Agro-terrorism. The main strategy of the Innocent Smoothies is the manufacture of juices made with fresh, not concentrated juices. Hence the company uses the strategy of product differentiation. The company keeps on innovating new recipes fulfilling the demands of all ages from babies to youngsters and adults. The company has achieved a cutting edge as compare to other competitors by preserving the natural ingredients of the fruits in the smoothies. “Over-processed foods have higher GI ratings as they are more easily absorbed into the bloodstream, so innocents refusal to use processed concentrates lowers GI scores further. Professor Millward, a top government advisor on nutrition, states quite clearly that "innocent smoothies contain all the phytoprotectants, fibre, vitamins and minerals that are naturally found in fruit. They are an important part of a healthy dietary lifestyle, replacing both undesirable drinks, which are essentially nutrient free and snacks which increase intakes of fat and salt." Full human based GI tests conducted by Reading Scientific Services in May 2005 showed average scores in the 40s for Innocent Smoothies. Foods with scores below 55 are considered a low GI food” (Innocent Drinks, 2005). The market share of the Innocent Smoothies has been increased at a tremendous 73% in 2005 outperforming all its competitors in 2005 according to the Britvic Soft Drinks Category Report 2006. The Company has remained innovative from the beginning, which is a key for its success. For example, the recent launch in 1-litre Tetra Pak cartons has generated some GBP30m revenue and the introduction of the first Smoothie for children has been very well received. Although Smoothies remain the major products of the Company but the size of other innovative products such as Juicy Water has also increased tremendously. The Company furthers aims to get the profits from ethics and to build the brand across Europe. Innocent Smoothies have real plans to expand their market Europe wide as stated by Reeds “We’re not anti-big business though, just anti-bad business. We want to build and grow. We care passionately about what we do and there’s a long, long way to go on building our business on ethical lines. We have absolutely no plans to sell.” The purpose of branding is to achieve a market position that will represent a sustainable competitive advantage. Companies are increasingly extending the line of variants available under a given brand, resulting in a family of related offerings. The reason for this is essentially economic and Innocent has gain many such advantages by successfully introducing a range of products. Product development is ongoing. The latest introduced in September and available until December, is a second ‘guest’ smoothie: innocent strawberry, raspberry & rhubarb. Expect more experimental use of vegetables. (Soft Drinks International, 2005) Reed has dreams of expanding Innocent’s brand across other healthy sectors and can see a day when there is Innocent a baby product; Innocent body care and even an Innocent island. The Company has a strong brand name, which can be used as an economic benefit in future but the two important factors should be properly addressed: 1. The benefits from the brand 2. The expectations of the target markets. The company’s first love though is the smoothie. Visitors to innocent’s headquarters at Fruit Towers off London’s Goldhawk Road with its faux grass carpet, picnic tables, umbrellas, table football and the ‘laid-back’ atmosphere should, not fool beanbags. The operation is slick and professional with a dedicated workforce. Drinks are delivered on time, beating industry best practice standards, solid customer partnerships have been created, and retailers supported by promotional and marketing activity, all building brand awareness. (Farr, 2006) Managing operations is a crucial aspect of each and every kind of business. The main concern of the initial thinkers is to such as Frederick Taylor, Henry Gantt, and Frank Gilbreth was to improve productivity. They all put great emphasis on human factor as an indispensable input. The emphasis has now shifted to the technology factor. The notion of production management has been transformed from the manufacturing activities and has expanded to activities as purchasing, warehousing, transportation, and other operations from the procurement of raw materials through various activities until a product in available to the buyer. The notion includes the process of delivering the services to the customers with the products. With the changing time the aspects covered are increasing, the process now also includes R&D, value creation, marketing management, sales activities, accounting and finance. The operation management model constitutes of inputs and outputs. The list of inputs include, 1. customer needs 2. Information 3. Technology management 4. Fixed assets of the business 5. Human capital 6. Variable assets related to transformation process. Information and the physical factors play an important role for managers in order to produce outputs. Most of the physical assets remain unchanged. These include buildings, land, manufacturing plants, warehouses etc. Planning, operating and controlling are the important constituents of transformation process. The improvement in the system is also an important aim of the model. Outputs consist of products and services and may even be information, such as that provided by a consulting organisation. (Koontz and Weihrich, 1994; p 633, 634) Although the mission statement of Innocent caters all the aspects from stockholder’s share values through maximizing returns to corporate responsibility by making them a responsible citizens that make a difference throughout the country. On the other hand the mission of the Company is also to take care of the employee’s wishes by being a great place to work so that the employees can become more productive and efficient and can help the company in achieving the highest position in the market by introducing new products and improved services. The philosophy of the company includes moments of optimism through the strong brand, value creation and customer satisfaction all over the country. It is not feasible for the company to sub contract their products as the brand establishment is not an easy job but the low quality products can severely harm the brand image. For Innocent drinks, the question is not whether the brand should be extended, but when, where and how the brand should be extended. Well-planned and well-implemented extensions offer a number of advantages to marketers. Innocent drinks is a strong brand and the customers have positive associations about the parent brand in memory and that at least some of these positive associations will be evoked by the brand extension. Innocent drinks have a long list of new successful products on its list. “The heart of Fruit Towers is the kitchen. This is where ‘Cherry Picker’ Lucy E and colleague Lucy T experiment with fruits, concocting new smoothie recipes. Eighteen have been introduced over the last two years along with seasonal smoothies, such as cherry and strawberries for this summer, special guest smoothies, the most recent being mangos, lemongrass and coconut, and thickies, a more indulgent yoghurt-based drink.” (Farr, 2006) Hence rather than sub contracting the products it will be feasible for the company to introduce new products. References Fred R. David, Strategic Management Concepts and Cases, Eleventh Edition, pp.165-166. Farr, A., (2006). Innocent but no ingenu, 1 June 2006, available from http://www.just-drinks.com/article.aspx?ID=86577&lk=ht Innocent drinks, (2004). National Employer of the Year 2004, innocent Drinks, Wants More People to Come and Join Them, 11 November 2004, available from http://www.just-food.com/ia.aspx?id=1341 Innocent Drinks, (2005). Innocent Smoothies All Have a Low GI Score, 1 June 2005, Source: innocent Drinks, available at http://www.just-food.com/ia.aspx?id=1518 Koontz, H. & Weihrich, H., (1994). Management: A Global Perspective, International Edition, McGraw-Hill, Singapore. Soft Drinks International, (2005). Smooth progression in the UK, 7 November, 2005 available from http://www.just-drinks.com/article.aspx?art=1153&type=2 Read More